Financial Crime World

Title: “Cayman Islands Money Laundering Risk: CFATF Report Reveals Gaps and Recommendations”

CFATF’s Damning Report on the Cayman Islands’ AML/CFT Measures

The Caribbean Financial Action Task Force (CFATF) released a report on the Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures in place in the Cayman Islands. According to the _CFATF Mutual Evaluation Report_ published in March 2019, the Cayman Islands face a high risk of money laundering (ML) and the financing of terrorism (FT).

Key Findings from the CFATF Report

The report identified several major concerns and areas for improvement, including:

1. Lack of Enhanced Due Diligence

The jurisdiction faced issues with:

  • Limited threshold for transaction reporting
  • Limited obligation for financial institutions (FIs) to perform Enhanced Due Diligence (EDD)
  • Gaps in beneficial ownership information
  • Weak regulation and supervision of FIs

2. High Financial Transaction Volume and Domestic Criminal Activities

Given its status as a major international financial center, the Cayman Islands:

  • Have a large financial services sector
  • A significant cross-border asset position and liabilities in 2014
  • Face inherent risks from domestic and foreign criminal activities

3. Weaknesses in Investigations and Prosecutions

Concerns were raised about:

  • A significant focus on minor domestic predicate offenses
  • Modest confiscation results
  • Limited focus on stand-alone ML cases
  • Foreign offenses
  • Complex investigations
  • The use of civil forfeiture

4. Risk-Based Supervision Regimes and Sanctions Screening

The report recommended the following:

  • Fully implementing risk-based supervisory regimes for dealers in precious metals or stones, real estate agents, and accountants
  • Increasing the level of sanctions screening
  • Improving private sector understanding of targeted person identification steps

The Need for Action

The CFATF report underscored the importance of strengthening the Cayman Islands’ AML/CFT framework and implementing the recommendations provided. The government has pledged to make necessary legislative changes and focus on money laundering and terrorist financing investigations within its financial crimes unit.

How Alessa Can Help

To mitigate money laundering risks and improve AML/CFT measures in the Cayman Islands and beyond, contact Alessa.